We have updated our Spotify (SPOT) 63-slide powerpoint pitch, incorporating post-Christmas data points. The primary changes involve assumptions on hardware uptake, which have come in better than expected. Changes have been made by Nicholas Stiege.
Among the topic covered here are:
- Good Recurring Gross Margin Visibility
- Trailing Metrics Fail to Contemplate Dependable Customer Behaviour
- Combining Streams, Surveys, Plans, and Promotions Globally into a Forecast
- Review of our Forecasts Correctly Anticipated the Last Two Beats
- Tracking Stream Counts for 23 Major Spotify Markets
- Stream Conversions to Premium Impacted by Market Launches & Partnerships
- Unique Forecasting Method Resulted in a Strong r^2 Model
- Forecasting Streaming #s Suggest Large Net Subscriber and GM Adds
- Positive Signs that Gross Margins can Inch Higher
- Split Mix is Improving w/ Growing Portion of Independents
- Details on Quantifying the Impact of Growing Independent Splits
- Spotify’s Differentiation Creates Gross Margin Upside
- Math Behind the Gross Margin Upside of Growing Independent Splits
- Reducing Churn is Another Driver for Higher Gross Margins
- Positive Signs that Gross Margins can Inch Higher
- Premium Subscribers Growth is Eating Away at MAUs (Premium Pipeline)
- Pipeline Growth is Slowing
- Surprisingly Difficult to Copy the Spotify Experience
- Switching Platforms Made Difficult
- Competing Apps aren’t Great
- Spotify Users Remain the Most Loyal – Implied Value of Discovery
- Declines in ARPU should moderate in 1H/19 as ARPU Declines Slow
- Plan types, not promotions / regional mix have been the largest driver in ARPU decline ex-FX
- Discount Inactive Subs
- Discounted trial costs indicate promotional effects are decreasing
- Regional / promo mix explained ~20% of ARPU declines in 2018
- ARPU Declines from International Expansion are being Offset by Less Promos
- Hardware Growth Has Become a Tailwind
- Spotify and Apple Music Subs are Roughly Even
- Riding the Android Wave
- Samsung Partnership Could Help Close the Gap with Apple Hardware Integration
- Music #1 Most Valued and Used Feature on Smart Speakers
- Apple was Slow to Make an Impact on Home Speakers; Has Hurt its Fanboys
- Hidden Benefit of Google Home Mini Promos
- Apple Has Picked the Low Hanging Fruit; Will Struggle Outside of iOS
- Cheaper Wearables will Improve Spotify’s Acquisition and Retention
- Organic Interest in Making Spotify Available Everywhere
- Roku Compatability Returned
- Spotify as an Acquisition Target
- Pandora Offer Validates our Streaming Valuation Framework
- Google / Amazon have Potential Synergies with Spotify
- Google / Amazon can Easily Swallow a $25+ Billion Price Tag
- Google has Explored a Buyout at a Similar Valuation to Ours
- Google Relationship Continues to Deepen with Time
- Spotify’s RoI and Data for Advertisers Matches Amazon’s Goals for Alexa
- Amazon’s Hardware Goals are More Attainable w/ Spotify
- Daniel Ek’s financial future is tied to SPOT’s stock performance
- CEO Pay is Structured for a Big Payout vs. Collecting a Salary
- Founders are Not Selling a Material Amount of Shares
- A Comparable Subscriber Valuation and its Implications to SPOT
- Blue Sky Opportunities in potential new country launches
- We believe Investors Should Look One Year Forward
